I. INTRODUCTION
Disputing parties increasingly resort to arbitration, particularly in commercial disputes, for a variety of reasons, including the fact that it is a faster, cost-effective, and confidential process in which the parties take an active role by selecting arbitrators who specialize in the relevant subject of dispute.
Thanks to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“New York Convention”), adopted on 10 June 1958 with more than 160 contracting states, arbitration decisions are recognized and enforced across the globe, including Türkiye.
Parties wishing to have recourse to arbitration for resolving current or potential commercial conflicts should enter into an arbitration agreement. This type of agreement can be made through a separate contract or an arbitration clause in the principal agreement that establishes the legal relationship between the parties.
Arbitration allows parties to freely determine the arbitrators or courts that will settle their cases, their number and characteristics, the method of selection, and the content of the arbitration agreement, such as the place of arbitration, the governing law of the arbitration agreement and the arbitration procedure, the substantive law applicable to essential requirements, the procedure, manner and language of proceedings, and the means of proof.
To make an arbitration agreement, the parties can select between two fundamentally distinct forms of arbitration, namely “Institutional Arbitration” and “Ad Hoc Arbitration”.
II. INSTITUTIONAL ARBITRATION vs. AD HOC ARBITRATION
INSTITUTIONAL ARBITRATION
In an institutional arbitration, the parties appoint an arbitral institution to carry out the whole process. The judiciary in institutional arbitration is not an arbitration center, but arbitrators selected by the parties. Institutional arbitration requires the parties to make an arbitration agreement that will specify an arbitral institution to resolve their current or future legal claims.
Since arbitral institutions have predetermined procedures and rules to settle disputes, the parties do not need to specify the requirements for their arbitration proceedings, in contrast to an ad hoc arbitration.
Institutional arbitration centers can be preferred because they are experienced in handling arbitration proceedings, are familiar with the procedures and rules of institutional arbitration centers and have the technical and administrative infrastructure to carry out the process.
AD HOC ARBITRATION
Unlike institutional arbitration, ad hoc arbitration allows the parties to manage any or all aspects of the arbitration process themselves.
The parties may determine their own arbitration rules or refer to the arbitration rules of the United Nations Commission on International Trade Law (UNCITRAL). Article 1 in UNCITRAL Arbitration Rules states:
“Where parties have agreed that disputes between them in respect of a defined legal relationship, whether contractual or not, shall be referred to arbitration under the UNCITRAL Arbitration Rules, then such disputes shall be settled in accordance with these Rules subject to such modification as the parties may agree.”
The parties may turn to ad hoc arbitration because the bureaucratic structure of institutional arbitration centers may result in increased expenses and delays in arbitration processes. Ad hoc arbitration appears to be more widespread than institutional arbitration in today’s commercial arbitration practices having international aspects.
Professional guidance from experts in the relevant legislation is crucial to understand why arbitration is advantageous for the resolution of certain disputes, to discern whether a dispute is suitable for arbitration, and to ascertain how the arbitration process can be managed properly and effectively.
